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Managerial Accounting

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Moderate

Standard Costing: Behavioral Application

MGRACT-GAXW39

Osco Company manufactures men’s shirts. The standard is to apply 8 buttons to each button down shirt and 2 yards of fabric to each shirt. Angela, the cutting- and assembly-tailor, used 1.85 yards of fabric to cut the fabric and sew each shirt.

After the shirts leave Angela’s department. they go to Jim’s department. Jim, the button-tailor that sews the buttons on the shirt, actually applied, on average,​ 9 buttons to each button down shirt.

Based on this information, should Osco Company fire Jim?

A

Yes, because Jim used more buttons per shirt, 9, than allowed 8.

B

No, the purchasing agent should be fired because he purchased substandard buttons that for 15% of the time could not withstand the pressure from the sewing machine foot.

C

No, because 15% of the shirts had to be scrapped because Angela oftentimes did not allow enough fabric for the shirts resulting in rework.

D

There is not enough information provided.